Financial emergencies can happen to the best of us. Your car might break down on the way to work, resulting in a $500 repair. Or, your air conditioning system might go kaput on the hottest day of the year, leaving you with no choice but to come up with $1,000 for an immediate fix.

And then there's the notion of getting laid off -- a prospect even the most dedicated workers face. If that happens, you could find yourself in a situation where you're without an income for months on end, leaving you no choice but to scramble to cover your bills as you look for work.

Piggy bank with bills sticking out its top

Image source: Getty Images.

Because financial emergencies can pop up when we least expect them to (hence the "emergency" factor), we all need savings to protect ourselves from the unknown. Ideally, we should all have an emergency fund to cover a minimum of three months' worth of living expenses, and preferably more like six months' worth of bills. Yet new data from Bankrate reveals that 23% of Americans have no emergency savings whatsoever. And those are the same people who risk wrecking their finances irreparably.

You need to do better

If you don't have emergency savings, you're opening yourself up to a world of financial upheaval. That's because the next time an unplanned bill lands in your lap, you'll most likely have no choice but to charge it on a credit card. Then, when that credit card payment comes due, you won't have the money to pay it off, and so you'll start racking up interest that will compound against you for as long as you carry that balance. In the process, you'll risk damaging your credit score, thereby making it more difficult for you to borrow money for the next emergency that comes your way.

Rather than go that route, a smarter bet is to work on building some cash reserves. This doesn't mean magically amassing six months' worth of living expenses overnight. Rather, it means slowly but surely accumulating some savings so that you're covered the next time an unanticipated expense creeps up on you.

How to get started

So how do you go from no savings to some sort of safety net? For one thing, take a look at your budget, or create one if you don't have one already, and identify spending categories to slash. This could mean downsizing to a smaller and cheaper apartment, cutting out restaurant meals and cooking at home instead, or canceling the gym membership you rarely use. It doesn't really matter which expenses you choose to reduce as long as you free up some money each month to stick in the bank.

Next, figure out ways to earn more money. You can try getting a side job to supplement your existing income and put all of its proceeds into your emergency fund. Or, you can take a hobby of yours, whether it's painting, photography, or baking, and try monetizing it. You might also consider taking inventory and selling off the things sitting around your home you no longer need or use, like that old laptop you replaced six months ago or the clothing items from last year that still have their tags on them.

Coming up with three to six months' worth of living expenses won't be easy, but if you want to protect yourself from financial ruin, it's what you need to do. So if you're among the 23% of Americans with absolutely no cash reserves, pledge to do better effective immediately. Otherwise, you could end up in a very sorry place the next time an unexpected expense hits you where it hurts.

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